Lightning eMotors tries to hold on in brutal market

DETROIT — Lightning eMotors CEO Tim Reeser doesn’t regret going for the straightforward money from a special purpose acquisition company merger two years ago. But like other transportation SPACs, the converter of small school buses to run on electricity is struggling to hold on.

“On the time, we would have liked a pair hundred million dollars to scale. We were in COVID. The markets were very difficult. The capital markets were willing to present us an awesome valuation. And we were in a position to get $230 million to scale,” Reeser said. “We couldn’t have done it another way.”

The corporate is selling stock at a reduction to a lender to get the cash it needs to maintain going. But Reeser is optimistic.

Lightning recently brought an electrified Class A faculty bus based on General Motors’ medium-duty 4500 HD truck to Belle Isle, a couple of miles east of GM’s headquarters. In ride-and-drives, it demonstrated why small school buses are a target-rich environment for business electric vehicles. 

“I’m telling you that is the fastest-growing EV segment, even faster than passenger vehicles regardless that it’s well behind passenger vehicles,” Reeser told a small group of reporters.

Lightning, founded by Reeser in 2008, has converted about 100 small school buses up to now. With an addressable market of 10,000 such buses a yr — and with generous federal and state incentives available — Reeser’s excitement is palpable.

Taking the bus route

“Through the COVID years, [school districts] didn’t buy any buses. So it’s an aging fleet that’s attempting to catch up and is beginning to buy more vehicles. So that is where we’re focused,” he said.

The deal for the Navistar Inc.-built GM 4500 is solid, Reeser said, though the longer term of the plant in Springfield, Ohio, where it’s made, is iffy. Navistar appears to be specializing in leveraging truckmaking operations in San Antonio and Escobedo, Mexico. As for bus bodies, Lightning works with Collins Bus Corp. for the Type A bodies it uses.

“Long run, GM has told us it’s available for the subsequent several years, so we imagine we’re OK,” Reeser said. “But we’re coming out with our own e-chassis in the event that they determine to discontinue this product.”

School and shuttle buses account for 80% of Lightning’s production. Ace Parking at San Diego International Airport operates 30 Lightning electric shuttles where they’ve amassed 1 million miles.

Major automakers dominate small Class 1-2 business vehicles. The Big 4 legacy truck manufacturers control Class 7-8 heavy-duties. 

“We’ve left that high-volume, low-customized space to the parents who’re good at it,” Reeser said.

Class 4-6 attracts plenty of electrification players — Workhorse Group, Shyft Group and Daimler Truck’s Rizon brand to call a couple of.  

Reeser thinks Lightning can account for a significant slice of Class A faculty buses. They drive a mean of lower than 80 miles a day on defined routes. Chassis electrification rivals Motiv Power Systems and Xos Inc. don’t compete in the college bus space.

Concerning the charging

Lightning is also producing a proprietary mobile charging system. The system is able to direct-current (DC) fast charging of as much as 4 buses concurrently. It can also dispense alternating current, commonly known as Level 2 charging, for vehicles like buses that sit unused for long periods of time.

4 charging cables hang behind the trailer, which may get its energy from quite a lot of sources.

“All of our vehicles support each Level 2 and DC fast charging,” Reeser said. “ACE does each. For six hours of dwell time at night, they use Level 2. But in the course of the day at lunchtime and breaks, they use a DC fast charge to make certain they keep [the shuttles] topped out throughout the day.”

Others like Xos and Tritium offer portable chargers, the latter a lease or purchase option from Nikola. Lightning sees portable chargers as a critical stopgap to assist school maintenance garages waiting for fixed charging of rental automobile operations augmenting existing charging stations during heavy use in specific locations.

Incentives as a driver

Through the Bipartisan Infrastructure Law, the Environmental Protection Agency is allocating $1 billion a yr for the subsequent five years to assist grow the variety of battery-powered school buses. Colorado, where Lightning is predicated, offers a $200,000 rebate per bus purchased. California offers $100,000. And the federal Inflation Reduction Act tacks on $40,000 per copy.

With a typical dealer sale price of $220,000 — twice the fee of a diesel — electric school buses have a speedy payback.

“They’re 80% cheaper to operate so even without grants [from] a TCO standpoint, they’re compelling today,” Reeser said.

The cash to scale

For all some great benefits of being in the fitting market at the fitting time, Lightning has financial challenges. It went public in April 2021 in the course of the SPAC frenzy when many firms chased the promise of massive payouts from combining with an organization created solely to seek out a merger partner.

Lighting selected GigCapital3 Inc., which valued the corporate at $586 million and raised $268 million that Lightning was promised at closing. Because 29% of the shareholders in GigCapital3’s initial public offering redeemed shares early, Lightning received about $230 million.

“One in all my mantras is hindsight just isn’t 20-20,” Reeser said. “For those of us who grew up within the ‘Back to the Future’ era, that movie first exploited this concept that if you happen to change a pair things previously, other unintended consequences might occur, and that’s true.”

Lightning cuts jobs to make money last

Lightning cut employment from about 330 to 250 earlier this yr. But being a public company requires meeting the necessities of being publicly traded. And which means having enough people to engineer products and enough to deal with compliance.

“When capital got very constrained, we said we’ve got to make certain we get to the finish line,” Reeser said. “We all know we’ve got an awesome product. We all know we’ve got great markets and niches. So we imagine in the long run, but we’ve got to make it to the long run.”

While Reeser would like Lightning to stay independent, he doesn’t rule out an acquisition, perhaps by longtime financial backer British Petroleum. BP is expanding rapidly into electrification. It has stuck with Lightning since 2014.

“Two years ago there was loads of public money and all of us leveraged that and made plenty of investments with that public money,” Reeser said. “Now that there’s less public money available, plenty of us are strategic partnerships.”

Dustup with Nikola

Lightning initially purchased batteries for its products from startup Romeo Power. When financially ailing Romeo — itself a SPAC-backed startup — was acquired by electric truck maker Nikola Corp. last August, Lightning’s battery supply dried up.

Nikola determined it might keep Romeo’s minuscule output for itself, spawning lawsuits from Lion Electric Co. and Lightning. Nikola has since moved the Romeo battery production in-house at the same time as it pivots from battery-electric trucks to deal with fuel cell models that require fewer batteries.

“They vandalized us,” Reeser said. “It’s painful because from my perspective, it was a fixable problem. Nikola said of their last earnings report that they’re the whole lot, including potentially bankrupting Romeo, so we don’t know what’s going to occur.”

Nikola declined to comment on the Lightning lawsuit.

“We’re evaluating a possible restructuring of Romeo,” Nikola said in its first-quarter 10-K filing with the Securities and Exchange Commission. “This restructuring may include the sale, license, transfer, or other disposition of some or all of Romeo’s assets, and will include [a bankruptcy filing].”

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